Otelco Files for Chapter 11 bankruptcy

MelodieWarner

Otelco Inc.
OTT, +0.00%
voluntarily filed for Chapter 11 bankruptcy protection in order to implement its previously announced prepackaged restructuring plan that will reduce its overall debt by roughly $135 million.

The wireline telecommunication services provider, which ended the third quarter with total liabilities of about $330.1 million, first disclosed its bankruptcy intentions last month.

Otelco on Monday said all of its senior lenders and holders of more than 96% of its senior subordinated notes outstanding voted in favor of the plan.

The Company expects to complete its financial restructuring at the end of the second quarter. The restructuring plan and other relief is still subject to court approval, regulatory approvals and other customary closing conditions.

Otelco had said in April Time Warner Cable Inc.
TWC, +0.29%
wouldn't renew its contract for wholesale network connections. The company expected the loss of the Time Warner Cable contract, which expired Dec. 31, and recent rulings by the U.S. Federal Communication Commission, to negatively impact its revenue.

The company also said last month its income deposit security units--which consist of common stock and senior subordinated notes--would be cancelled and the existing senior subordinated debt will be converted into equity.

IDSs closed Friday at $1.62 and were inactive premarket. They have dropped 88% over the past 12 months.

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